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1969 (7) TMI 120

..... ll , Q. C. and J. P. Warner , for the first five respondents J. Raymond Phillips , Q. C. and Henry Brooke , for the sixth respondent JUDGMENT July 29, 1969. LORD REID ; My Lords, I agree with your Lordships that this appeal should be dismissed and I shall only add a few observations. Natural justice requires that the procedure before any tribunal which is acting judicially shall be fair in all the circumstances, and I would be sorry to see this fundamental general principle degenerate into a series of hard-and-fast rules. For a long time the courts have, without objection from parliament, supplemented procedure laid down in legislation where they have found that to be necessary for this purpose. But before this unusual kind of power is exercised it must be clear that the statutory procedure is insufficient to achieve justice and that to require additional steps would not frustrate the apparent purpose of the legislation. In the great majority of cases which come before this tribunal all the relevant facts are known to the taxpayer and he has a full opportunity to set out in his statutory declaration all the facts which he thinks are relevant and also all arguments on which he relie .....

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..... f circumstances, are right and just and fair. Natural justice, it has been said, is only " fair play in action. " Nor be we wait for directions from Parliament. The common law has abundant riches : there may we find what Byles J. called " the justice of the common law " (Cooper v. Wandsworth Board of Works [1863] 14 C. B. (N. S.) 180, 194). I approach the present case by considering whether in all the circumstances the tribunal acted unfairly. It is not now suggested on behalf of the appellants that they had a right to insist upon being heard orally before the tribunal. But the tribunal declined to furnish the appellants with a copy of the counter-statement of the commissioners and declined to allow the appellants to submit written comments or arguments in regard to such counter-statement before proceeding to a determination. Was that in all the circumstances unfair ? In the careful address of counsel for the appellants we were referred to many decisions. I think that is was helpful that we should have been. But ultimately I consider that the decision depends upon whether in the particular circumstances of this case the tribunal acted unfairly so that it could b .....

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..... her in this case it should be held that the tribunal acted unfairly. Here it becomes necessary to consider the statutory provisions. The tribunal is a statutory body. There are statutory directions to it. Will I have expressed the view that the statutory provisions must not be read as in any way absolving the tribunal from doing at all times what in all the circumstances is fair, even at a stage when no decision finally adverse to the taxpayer is being made, it is, I think, a positive consideration that Parliament has indicated what it is that the tribunal must do and has set out that the tribunal must take into consideration three documents (a) the declaration (b) the certificate and (c) the counter-statement, if there is one. In his statutory declaration the taxpayer, who ought to know all about his affairs, will have been able to set out fully why he considers that section 28 does not apply. If the tribunal follows the course that Parliament has defined and decides not to extend that course I do not think that by reason of that circumstances alone it should be held that they have acted unfairly. I would dismiss the appeal. LORD GUEST.-My Lords, I have had the advantage of readin .....

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..... , to some extent at any rate, this is a judicial tribunal which has to apply the principles of natural justice in that the taxpayers are given an opportunity of stating their case. Upon the second point I can see no reason why, if the principles of natural justice have to be applied to a tribunal entrusted with a final decision, the same should not be true of a tribunal which has to decide a preliminary point which may affect parties' rights. There is, moreover, in my view, no authority for this latter proposition of the revenue. The case of Cozens v. North Devon Hospital Management Committee*[1966] 2 Q. B. 330 which was cited in support of this contention is not a satisfactory decision. The circumstances were special, and it should not, in my view, be followed as a matter of principle. For the appellant it was contended that in the case where the tribunal was entrusted with the decision of a preliminary point which affected parties' rights the principles of natural justice in their full vigour must be employed. Your Lordships were urged to adopt the dissenting judgment of Salmon L. J. in Cozens. The true view, in my opinion, is that expressed by Tucker L. J. in Russell v. .....

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..... -statement the commissioners would then certainly require an opportunity to reply. There might be a demand for a reply. This would entail further delay in a procedure which was essentially designed to be fairly summary. It is clearly necessary that the revenue should be given an opportunity of submitting a counter-statement, as if the tribunal decided against them that is the end of the case and they can take the matter no further, whereas, on the other hand, if the tribunal decide that there is prima facie case under sub-section 5(d) the taxpayer may go to the Special Commissioners and thereafter if dissatisfied with their decision appeal to be reheard by the tribunal. Having regard to all these factors the section does, in my opinion, give the taxpayer a sufficient opportunity of stating his contentions to the tribunal and there is nothing so unfair about the procedure as to entitle the court to say that the principles of natural justice were not followed. For these reasons I would dismiss the appeal. LORD DONOVAN.-My Lords, this appeal arises out of the provisions of section 28 of the Finance Act, 1960, which is intended to cancel tax advantages from certain transactions in secu .....

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..... ue's case. Such a counter-statement was prepared in the present case but because of the proceedings referred to below has not yet been submitted to the tribunal. The first five respondents to this appeal constitute the tribunal. When the tribunal receives the aforesaid three documents its duty under section 28(5)(b) is to take them into consideration and determine whether there is or is not a prima facie case for proceeding in the matter. If they determine that there is not, the section ceases to apply to the taxpayer in respect of the specified transaction or transactions. Otherwise the section remains applicable and the commissioners may proceed with their authorised " adjustments " so as to cancel the tax advantage. (See section 28(3)). Against these there is a right of appeal to the Special Commissioners, a further right of appeal by way of re-hearing by the aforesaid tribunal, and a right of appeal to the High Court by way of case stated on a point of law (section 28(6), (7) and (8)). Where the tribunal finds, on consideration of the three documents mentioned above, that there is prima facie case for proceeding, they are not obliged under any express provision of .....

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..... s on the ground that it raised no question open to serious argument. Upon appeal by the two appellants to the Court of Appeal this decision was upheld without counsel for the respondents being called upon. Lord Denning M. R., Diplock and Edmund Davies L. JJ. decided, as I read their judgments : (1) that where a tribunal is simply called upon to decide whether a prima facie case exists, there is no initial presumption that the rules of natural justice must apply ; (2) that in the present case the language of section 28 in any event precluded any such presumption. The court therefore upheld the decision of Pennycuick J., that the orginating summons disclosed no cause of action and should be struck out. In the Court of Appeal the appellants abandoned their claim to an oral hearing by the tribunal. Before your Lordships it was agreed that the question to be decided should not be whether the originating summons should have been struck out, but that the substantive issue should be decided, namely, whether the rules of natural justice required that the appellants should see any counterstatement of the Commissioners of Inland Revenue, and be entitled to reply to it, and have their reply ta .....

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..... upon it, and have his comments taken into consideration by the tribunal together with the other documents already specified by the section. And if this were allowed, then inevitably the Commissioners of Inland Revenue would have to be given an opportunity of considering the taxpayer's comments, and of submitting a further counter-statement to the tribunal. For the decision of the tribunal is conclusive if it is adverse to the commissioners though not so to the taxpayer. The exchanges might not stop even there. I do not believe that Parliament intended that the additional safeguard given to the taxpayer by this preliminary procedure should develop into something like a round-by-round contest conducted on paper. I think that by specifying three documents only, it was intended that these three documents only were the ones to be considered by the tribunal at this stage. All the issues would be open, and each sides' documents submitted to the tribunal would be available at the subsequent appeal hearings if any took place. Moreover, any unfairness to the taxpayer in his not seeing the counterstatement before it is considered by the tribunal is, in my view, more apparent than rea .....

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..... declaration, all the facts and grounds upon which he bases his opinion that section 28 does not apply to him, has, if the tribunal nevertheless finds that a prima facie case exists, simply failed to qualify for the special advantage which he sought. I agree that one cannot dismiss the present appeal simply by saying that proceedings before the tribunal at this stage are merely for the purpose of deciding whether there is a prima facie case and that accordingly the rules of natural justice do not apply. Otherwise it would be permissible for a member of the tribunal to sit even though he had advised the taxpayer in the particular transaction under scrutiny. Nor, on careful reading of the judgments in the Court of Appeal do I think that they take any such short cut to a decision. For myself I agree with their conclusion that reading the section as a whole it is clear that Parliament intended the three specified documents to be considered by the tribunal at this preliminary stage, and those three documents alone ; and I reach this conclusion bearing in mind the full rights of appeal against subsequent proceedings which the section confers ; and also the further consideration which I ha .....

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..... an otherwise good defence (Cozens v. North Devon Hospital Management Committee) [1966] 2 Q. B. 330 or by exposing him to a new hazard, or as when he is prevented, however temporarily, from taking action which he wishes to take. In the present case, the decision of the tribunal may have the effect of denying the taxpayer the opportunity of eliminating, in limine, a claim which may otherwise have to be fought expensively through a chain of courts. I am not, therefore, satisfied with an approach which merely takes the relevant statutory provision (Finance Act, 1960, section 28 (4)), subjects it to a literal analysis and cuts straight through to the conclusion that Parliament has laid down a fixed procedure which only has to be literally followed to be immune from attack. It is necessary to look at the procedure in its setting and ask the question whether it operates unfairly to the taxpayer to a point where the courts must supply the legislative omission. I echo the well-known language of Byles J. in Copper v. Wandsworth Board of Works 14 C. C. (N. S.) 180, 194. I need not restate the numerous authorities in which the general principle has been affirmed. The strength and pervasivenes .....

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..... n the context of section 28 of the Finance Act, 1965, which by implication or contrast limits or excludes the general rule. Thirdly, it is true, as the judgment in the Court of Appeal point out, that ex parte applications are frequently made to the courts and granted without hearing the party affected : but merely to say this, overlooks that procedure invariably exists, and is where necessary invoked, for enabling the party affected rapidly seek annulment or amendment of the order made against him. The decision on which the respondents mainly relied, In re Hammersmith Rent-Charge [1849] 4 Ex. 87, so far from supporting an argument that orders, of an interim kind, may normally be made ex parte, shows to me the contrary, since all the learned judges, though differing in their ultimate conclusions, proceeded on the basis that ex parte procedure was only tolerable if, in one way or the other, the party affected had a way open to him to have any order set aside. On this point there are two other decisions of relevance. On the side of the respondents, Cozen's case [1966] 2 Q. B. 330 was invoked to show that an order, vitally affecting a party's interest, may be made ex parte if t .....

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..... n " uncovenanted benefit " or a kind of bonus to the taxpayer, he must gratefully take it as he finds it in all its nudity from the section. Whether the benefit represents generosity or bare justice, he is entitled, if offered a proceeding of a judicial character, to insist that its judicial character should be a reality, that the procedure should be fair. The procedure laid down is as follows : first, the commissioners must notify the taxpayer that they have reason to believe that the section may apply to him in respect of a transaction or transactions. These must be specified in the notification, but no doubt this may be done in very general terms-in the present case we find a reference to " all other transactions of whatever description relating thereto. " Then the taxpayer may make a statutory declaration stating the facts and circumstances on which he bases his opinion that the section does not apply and sends this to the commissioners. It is then for the commissioners to decide whether they wish to proceed, and if so they send to the tribunal a certificate to that effect with the statutory declaration and, if they wish, a counter-statement. This may contai .....

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..... oceeds, the taxpayer should be entitled to see the counter-statement : certainly he should if an appeal goes to the tribunal under sub-section (6), since it would be wrong that as an appeal body they should be in possession of a document which one side has not seen and I think the same should be done if the case goes to the Special Commissioners. Secondly, in my opinion, a residual duty of fairness rests with the tribunal. I would, therefore, think them empowered, if in any case where they are exercising their function under sub-section (5) they consider exceptionally that material has been introduced of such a character that to decide upon it ex parte would be unfair, to take appropriate steps to eliminate that unfairness. I do not think the rules need be formulated or procedures laid down. The tribunal can deal with these exceptional cases as they think best and I have no doubt that they will have in mind that justice to the revenue requires that, since a decision one way is conclusive, the revenue ought to have the last word. In reaching the above conclusion I have not been influenced by the procedure said to have been followed over many years by the Board of Referees establishe .....

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